A properly written transmittal letter to your clients accompanying the income tax returns you prepare will serve to minimize the instances of discontented clients claiming interest and penalties owing are due to the fact that you didn’t file their returns on time or you did not communicate the appropriate information to them. Many practitioners claim that such a letter is not necessary as they personally meet each client and go over all the issues that a good transmittal letter would cover. While this is excellent client service, a transmittal letter provides documented evidence of this discussion with your client, in the event a “problem” arises at a later date, as well as a handy reference for your client and a permanent record of the discussion for both your and their files. A copy of the letter accompanying the returns should be kept in your documentation.
The letter can be your own or one that is included with your income tax return preparation software and at a minimum should include the following items:
- The date as evidence of when you filed the tax return and communicated the appropriate information to your client. It is important to include a copy of the letter for your documentation, as most tax preparation software will automatically date the letter on the date printed if required in the future.
- Due dates for the payment of any balances owing.
- Instalment requirements for the next taxation year.
- Information regarding balances carrying forward such as RRSP contribution limits and un-deducted amounts as appropriate.
In addition, you may wish to discuss other issues such as your involvement, if any, with foreign asset reporting or specifically address the fact that a requirement does exist and that you have or have not done anything to meet that requirement.